Indexers have one job: To match the bm. If they start buying $TSLA too early - which is not going into the bm until Friday after close - they create dispersion (deviation) from the bm. Most funds give their PMs flexibility (+/- 3 days from inclusion) to add or delete positions. https://twitter.com/adrfinance/status/1339159841923805184
2/ Even if Indexers have flexibility to trade early, they can wait. The trading process is to give instructions to their favorite 5 or so brokers to guarantee fills over a few days: e.g. 1/4 @ VWAP (avg price) Thurs, 1/4 @ VWAP Fri, and 1/2 at the close price on Fri. $tsla
3/ Each of the brokers will line up hedge fund clients (special sits and long/short funds) on the other side who will agree to supply $TSLA @ VWAP to cross the trade. These hedge fund desks may have been buying TSLA all along since 11/16 and may now want to take profits.
4/ The market functions fine with Indexers buying and hedge funds selling as long as the 130M shares demanded does not exceed the amount of $TSLA shares to be supplied. Nobody wants a squeeze. As $TSLA price rises more stock is made available from hedge funds and other clients.
5/There are safeguards in place to prevent a squeeze from occurring: Brokers who commit to fills for Indexers have clients they can ask for more shares; other brokers can be brought in; the issuer can be asked to do a secondary ( $TSLA last week, $FB 2013) to provide liquidity.
You can follow @garyblack00.
Tip: mention @twtextapp on a Twitter thread with the keyword “unroll” to get a link to it.

Latest Threads Unrolled:

By continuing to use the site, you are consenting to the use of cookies as explained in our Cookie Policy to improve your experience.